But recently, I’ve been haunted by a question I can’t shake. It started in a thread on a German finance forum, someone asked: “My grandmother had the Sparbuch (savings book). My parents had the Bausparvertrag (home savings contract). I have my MSCI World ETF. What will my children have?”
At first, I rolled my eyes. Another “what’s next?” thought experiment from someone who’s watched too many YouTube videos. But then I sat with it. And the more I looked at the evidence, the shrinking stock market, the rise of private capital, the quiet fracturing of the index investing consensus, the more I realized: our children might genuinely look at our beloved ETFs the way we look at our parents’ Riester-Rente (Riester pension) contracts. With pity.
Why the Stock Market Is Shrinking Under Our Feet
Let me hit you with a number that stopped me cold. In 1996, there were around 8,100 publicly listed companies in the United States. Today? Roughly 4,000 to 4,500. That’s not a minor dip, it’s a near-halving of the public market universe over three decades.
This isn’t a bug. It’s a feature of how capitalism has evolved. As detailed in a recent analysis from Finanzen100, there are three structural forces squeezing the stock market smaller:
- Regulation overload. After scandals like Enron and WorldCom, the US passed the Sarbanes-Oxley Act in 2002. It made public markets safer but punished smaller companies with compliance costs that can run into millions. Going public became a luxury good.
- Private capital abundance. Here’s the real game-changer. Companies don’t need to go public anymore. Venture capital firms, private equity funds, sovereign wealth funds, and family offices are sitting on trillions. A startup can raise $500 million in private rounds without ever filing an IPO prospectus. Why would they subject themselves to quarterly earnings calls and activist investors?
- Relentless consolidation. Big fish eat small fish. Public companies get acquired and delisted. The survivors get bigger, older, and slower-growing. Your ETF is increasingly a basket of corporate dinosaurs.
The result? When you buy an MSCI World ETF today, you’re buying a smaller, more mature, and less dynamic slice of the economy than you would have 25 years ago. The growth, the real growth, is happening before companies ever hit the public markets.
The Late-Stage IPO Problem
Consider Facebook. When it went public in 2012, it was already eight years old and valued at roughly $100 billion. The hypergrowth phase, the phase where early investors made 100x returns, had already happened on private markets.
This is the norm now. Companies stay private longer. They tap public markets not as scrappy startups needing growth capital, but as mature behemoths looking for liquidity for early investors. The IPO has become an exit strategy, not a launchpad.
For my children, and yours, this means the classic ETF playbook is running on a flawed premise. The premise is: “Buy the market, capture all economic growth.” But the premise is increasingly false. A growing chunk of economic value creation happens in the shadows of private markets, inaccessible to the index investor.
This is exactly the argument you’ll find in discussions about why the next generation might move beyond the one-ETF mindset, it’s not that ETFs are broken, but that they’re incomplete.
What Will Replace the ETF? The Contenders
So what will our children buy instead? Let me be clear: I’m not predicting the death of ETFs tomorrow. But I am saying that a thoughtful investor in 2040 will likely have a very different portfolio than one today.
Contender 1: The ELTIF and Private Market Access
The most concrete trend is the democratization of private markets. In Europe, a regulatory vehicle called the ELTIF (European Long-Term Investment Fund) is opening doors that were previously locked for retail investors. Think of it as a way for normal people to buy into private equity, private debt, infrastructure, and other illiquid assets that institutions have been exploiting for decades.
The rule of thumb emerging from analysts is simple: if you’re going into private markets, cap it at around 20% of your long-term portfolio. Build positions gradually over years, not in one lump sum. And be prepared to kiss that money goodbye for a decade, illiquidity isn’t a bug, it’s the feature.
Contender 2: The “ETF of ETFs”
There’s a darkly humorous thread in the German finance community where someone proposed an ETF that invests in other ETFs. Another commenter fired back: “Let’s start an ETF that physically replicates itself.” The joke is that we’re approaching peak recursion.
But it’s not entirely absurd. Products like Vanguard LifeStrategy are already fund-of-funds. The next generation might routinely hold meta-ETFs that dynamically allocate across asset classes, geographies, and even private markets based on algorithms. It’s CAPE ratio-based tactical allocation on autopilot.
Contender 3: Direct Private Company Ownership
Here’s where it gets speculative. What if the next generation doesn’t want financial intermediaries at all? Platforms already allow fractional ownership of startups, real estate, and even collectibles. Tokenization could let someone own 0.001% of a Berlin logistics startup without needing a venture capital fund.
The regulatory hurdles in Germany are brutal, but the direction is clear: disintermediation. Why pay 0.5% TER on an ETF when you can directly own a diversified basket of private companies through blockchain-verified tokens?
Contender 4: Back to Hard Assets
Every generation eventually rediscovers the fear that paper money is worthless. Our grandparents bought gold. Our parents bought real estate. Our children might buy bitcoin, timberland, or water rights.
The generational shift in attitudes is already visible. Talk to a 25-year-old in Germany today and ask them about the classic buy vs. invest dilemma parents face when planning for their children’s future and they’ll likely laugh at the idea of a Bausparvertrag (home savings contract). They want liquidity, optionality, and assets that can’t be printed into oblivion.
The Demographic Wrecking Ball
Let’s layer on another uncomfortable truth. Germany’s population is aging and shrinking. The working-age population is declining. Pension contributions are under strain. This isn’t just a social policy problem, it’s an investment problem.
As one analysis puts it, how demographic changes like Germany’s decline could reshape long-term investment returns is a factor most ETF enthusiasts ignore. If domestic demand shrinks for decades, the returns on companies dependent on European consumers will be structurally lower. Your global ETF might not be as global as you think, it’s heavily weighted toward developed markets with their own demographic time bombs.
The next generation of investors will have to navigate a world where the easy tailwinds of population growth and market expansion have turned into headwinds. That might push them toward frontier markets, automation plays, or asset classes that don’t depend on warm bodies buying stuff.
What This Means for You Right Now
Before you panic-sell your ETF portfolio, let me be clear about what I’m not saying. I’m not saying sell everything and buy ELTIFs. I’m not saying the MSCI World is dead.
What I’m saying is this: the passive investing consensus is built on assumptions that are quietly eroding. The assumption that public markets capture all significant economic growth. The assumption that index composition is stable. The assumption that 0.2% TER is the only cost worth worrying about.
The smartest move you can make today is to develop intellectual humility about your investment framework. Understand what your ETF actually owns. Understand the generational shift in investing attitudes from Festgeld to ETFs and how that shift is still accelerating.
Start asking yourself: if my children roll their eyes at my ETF strategy the way I roll my eyes at my parents’ life insurance policy, what will they be buying instead?
Here’s my best guess, based on the data and trends I’ve seen:
- Multi-asset, multi-structure portfolios. Not just stocks and bonds, but allocations to private equity, private credit, infrastructure, and maybe even royalties or litigation finance. The 60/40 portfolio is dead, the 40/30/20/10 is emerging.
- Dynamic allocation rules. Static percentages are going out of style. The next generation will use rules-based systems that adjust based on valuation, volatility, and macroeconomic signals. Your children might have an algorithm managing their “ETF of ETFs.”
- Tokenized everything. The boundary between “public” and “private” will blur. If a company can issue tokens representing ownership without an IPO, why wouldn’t it? The investment universe will expand far beyond what’s listed on the Frankfurter Wertpapierbörse (Frankfurt Stock Exchange).
- Thematic and values-based investing. Not as a marketing gimmick, but as a genuine strategy. If you believe climate adaptation is the megatrend of the century, you won’t buy a broad market ETF, you’ll buy specialized vehicles that capture that exact exposure.
The Uncomfortable Conclusion
Here’s the thing about investment consensus: it’s always wrong at the extremes. In the 1990s, everyone believed in active management and expensive mutual funds. That consensus got destroyed by low-cost index funds. Today, everyone believes in passive ETFs. That consensus will also get destroyed, not because ETFs are bad, but because every dominant strategy carries the seeds of its own obsolescence.
The next generation will look at our neat, tidy, auto-invested ETF portfolios and see them the way we see a ten-year life insurance policy with 8% front-loaded fees: a product of its time, not a timeless truth.
They’ll invest differently because they’ll face different constraints, lower expected returns, higher volatility, a world where the stock market no longer represents the economy. And they’ll use tools we can barely imagine.
The only question is whether we’re willing to update our thinking now, or whether we’ll be caught holding the financial equivalent of the Sparbuch (savings book) when the world moves on.
Personally, I’m keeping my ETF core. But I’m also starting to explore the edges. A small allocation to an ELTIF. A tiny position in tokenized real estate. A watchful eye on where private market access is heading.
Because I’d rather be the parent who figured it out early than the one whose kids have to explain what they’re doing with their money.
And if you’re wondering whether traditional retirement savings will still be viable for the next generation of investors, the answer might be uncomfortable: only if we stop assuming that what worked for us will work for them.
The bull market of the last decade has made passive investing feel like a cheat code. But cheat codes get patched. The game is always changing. The question isn’t whether our children will invest in ETFs. The question is whether we’re ready for what comes next.